Analysis & Publications

Government procurement accounts for a significant part of the Indian GDP, and hence it is very important to ensure that the system is transparent and free of any corrupt activity. The Government has already taken various initiatives to ensure a clean and transparent process of procurement in India, but there is still a lot of room for improvement. Government procurement is important as it has direct effect on market behavior and hence procurement policy should aim to obtain ‘value for money’ by promoting fair competition among suppliers. In this article, the author urges the need for urgent reforms in public procurement process as also highlighted by many national, international and anti-corruption initiatives. The article also lays down the importance, usage and principles governing the Integrity Pact and its relevance for India.

In India, road projects are awarded via one of the three models: Build-Operate-Transfer (BOT)-Annuity, BOT-Toll, and EPC (engineering, procurement and construction) contract. After the BOT model of Public Private Partnership (PPP), an advanced version of the Model Concession Agreement (MCA), presently called as Hybrid Annuity Model (HAM) is paving way for road projects. The hybrid model is supposed to be a win-win situation for the government and developers. The government is expected to fund up to 40 percent of the project cost while the remaining 60 per cent to be funded by the private player, and thus easing the financial burden on the exchequer as well. This comes as a welcome step in the situation of dismal performance of highway construction projects awarded under MCA. This paper summarises the key changes and features which are brought under the new arrangement and provides a comparison with pat models.

In the light of the recent revelations of discrepancies in procurement in Indian Railways, this brief discusses the procurement patterns in the sector and reflects on the current government’s reformative initiatives towards the tendering processes in order to ensure sectoral transparency and accountability. It analyses the recommendations of the committee formed by the ministry and its subsequent actions on delegation of decision-making powers for contracting railway works and services to field officials to facilitate faster implementation of projects. The presence of structural discrepancies in the sector mars the process of its procurement through prevailing restrictive and anti-competitive practices. Analysing cartels and other restrictive procurement practices in the sector, the brief concludes with the suggestion that an incremental and evolutionary solution will not suffice to address centralisation, non-transparency, inordinate delay and non-accountability in commercial and other decision-making that the Indian Railways has reached. Instead, there is a need to shake the system out of its cultural status and to enthuse a new quintessence to reorient it to the path of sound and fast effective business-like decision-making.

The fact that public procurement involves interactions between the government and the private sector- two groups with very different, often conflicting yet equally valid interests- is a challenge. In order to address the growing demand for more data in the field of public procurement and to meet the overall objectives of procurement policy i.e. value for money. With the objective to promote small and medium enterprises along with green growth, the anti-corruption Working Group of the G20 called on international institutions to develop benchmarks that would support cross-country comparison of procurement systems at the global scale. In 2013, in response, the World Bank Group developed ‘Benchmarking Public Procurement’, an indicator-based initiative that provides comparable data on regulatory environments. This brief, highlighting the crucial importance of this initiative, lists through varied examples that how procurement systems, regardless of the countries’ level of income, lack transparency and clarity. It also suggests the weak implementation of rules in few countries, which are sluggish on their trajectory of efficiency in public procurement systems.

Public procurement has been long used as a tool to attain social outcomes. Some of the preferential practices arise due to extending protection to certain PSUs, small Scale Industries, KVIC, and hand-loom sector as a feature of a country’s Public Procurement Policy. This is done through application of preferences and reservations in public procurement. These preferences obviously are in conflict with the basic principles of ‘transparency’ and ‘value for money’, and therefore need to be continuously reviewed as to their necessity and continuation. With the recent ‘Make in India’ policy in picture, this article suggests that modifications in public procurement policies of the government to accommodate make-in-India should be based on reflections upon existing procurement tools and practices, manufacturing strengths in a particular sector, legal opinions and position of government of India and other stakeholders.

Public procurement is where taxpayers’ money gets converted into tangible products that citizens care about: schools, roads and hospitals. Therefore, it is critical that public contracts should be fairly awarded and offer good value-for-money. When government and business meet, rules need to be clear and deals open to the public. Unfortunately, very few countries publish open data on government contracts.
This brief mentions that open contracting provides publicly accessible, timely and comparable data on government contracts. This data allows citizens and business to engage with government on the issues they care about. The ultimate goals of these activities are to achieve value for money for government, provide fair and competitive access to opportunities for businesses, to detect and deter fraud and corruption, and to ensure high quality service delivery outcomes from the contracts. The brief sums up with putting open Con-tracting in practice by demonstrating lessons from Ukraine.

The Arbitration and Conciliation Act, 1996 (“Act”) has been amended by the Arbitration and Conciliation (Amendment) Ordinance, 2015 (“Ordinance”), promulgated by the President of India on October 23, 2015. The 1996 Act was enacted for ensuring party autonomy and minimal court intervention in arbitration and greater coherence and consistency between domestic arbitration law and international practices. Despite this, arbitration in India continues to be ad hoc, expensive and long drawn. Many foreign investors have been hesitant to invest in India, due to the various delays associated with the judicial system of the country and often suffer from excessive court intervention in arbitrations. The Ordinance introduces several significant changes to the 1996 Act. The object of these changes is to expedite the arbitration process and minimize court intervention in arbitration process and address some of the issues, such as delays, prolixity and high costs, which have been bane of arbitrations in India.

Recent Comments

Archives

CUTS Institute for Regulation & Competition (CIRC) was established in 2008 by CUTS International. With the mission to be a ‘Centre of Excellence on Regulatory and Competition Issues’, CIRC primarily focuses on economic regulation in infrastructure sectors, and competition policy and law with an objective of reaching out to the target audience in India and other developing countries in Asia and Africa. For further details, visit CIRC Website.